TT 2022. Form 1116 ALT.

[gbacchin]

I waited for today's update of Form 1116 ALT, but there is still an error on line 6 calculation. Instead of using lines 2-5 that show the correct calculation for ALT, it is copying numbers from line 6 of the non-ALT version of Form 1116. Pro-rata share of deductions not definitely related should be zero for ALT. Previous versions of TT had line 6 calculated correctly.

[Anonymous_]

@pk ? Not sure about the calc issue.

[gbacchin]

I removed HTKO and then the ALT calculations were correct. As soon as I entered HTKO just as a column even with no numbers, ALT line 6 becomes immediately incorrect even if HTKO is not relevant for ALT in my case.

[pk]

@gbacchin , interesting  --- can you give a little more detail as to the scenario ( No Personally Identifiable Info, please ) and I run  it on my copy of Home & Business Windows and  delve into what it thinks it is doing  -- please

pk

[gbacchin]

Hello pk,

thanks for looking into this.

Scenario: foreign qualified dividends with 15% tax paid in the foreign country A as per double taxation agreement. For simplicity, let's assume that you are in the 15% tax brackets for dividends. On Form 1116 regular tax line 1a, the dividend income is multiplied by 40.54%, on AMT is multiplied by 53.57%. This triggers HTKO for regular tax, but not for AMT.

Before entering HTKO, all calculations are correct and line 6 on Form 1116 AMT is correctly zero. As soon as you enter HTKO column name (just the name with no numbers), line 6 on Form 1116 AMT for country A becomes a non-zero number despite the sum of the other lines is still zero. Besides, HTKO column appears in Form 1116 AMT even if not applicable and there is no way to remove the column name.

Now fill-in HTKO column with numbers and add line 13 in regular taxes ('taxes reclassified under HTKO'). Everything is copied across to Form 1116 ALT including line 13. I tried to remove all numbers under HTKO column in AMT which is possible, but in addition to line 6 issue, you cannot remove the values from line 13 making the AMT calculation wrong.

Thanks,

Gianluca

[gbacchin]

Have you had a chance to look into this issue? If not, I do I report the bug directly to Turbo Tax?

There is a further bug when printing the forms in the same scenario... ALT General Page 2 is missing and then a new set of ALT copies named '1' and '2' instead of 'COPY1' and 'COPY2' appears!

Thanks

[BillM223]

This is a complex tax return to create; you would save me a lot of time by sending me a "token" of your return. A token is a number entry into a TurboTax data base where a "sanitized" version of your return is put. By "sanitized", I mean that all personally identifiable information is removed, so we see your numbers but not your name, your Social Security, business names, and so on.

To send us a token, please do the following: 

TurboTax Online:  

Click Tax Tools in the menu to the left.

Click Tools, and then

Click Share my file with Agent.

A pop-up message will appear. Click OK to send the sanitized diagnostic copy to us.

Provide the token number that is generated onto this thread.

TurboTax Desktop:

Select Online menu if the customer is using Windows. Select “Help” if using a Mac.

Select Send Tax File to Agent.

A pop-up message will appear, and the customer will select, Send. If using Mac "Send Tax File to TurboTax Agent" 

Note: Desktop will save a file to your computer unless you uncheck the box.

Another message will appear. Provide the token number that is generated onto this thread.

At the bottom of your reply (with the token) add "@" "BillM223" (without the space in between) so I will be notified.

This will let us see what is happening on your return. Thanks.

[gbacchin]

Hello Bill,

thanks for looking into this.

I sent you two files: 1060811 is the version with HTKO (regular tax credit is correct), 1060812 is the version without HTKO (ALT foreign tax credit has the correct calculation). Note that in my tax situation, HTKO is a must for regular and it does not apply to ALT foreign tax credit.

A simple test is to use 1060812 and enter the HTKO column in the regular tax credit. You can see line 6 changing immediately to copy regular values into ALT and HTKO becomes un-removable. If then tax reclassification value is entered in line 13, it is copied to ALT too. To be able to submit electronically, I need to have HTKO column removed from 1060811 for ALT, line 6 as in 1060812 and line 13 be zero for ALT. These ALT issues were there also in previous years versions of TurboTax.

The errors that were not there in previous year versions are the '1099 taxes' instead of the date on Part II, Country A alongside the printing issue with ALT COPY 2 second page missing and ALT copies duplicate with '1' and '2' instead of 'COPY1' and 'COPY2'.

Thanks,

Gianluca

@BillM223

[BillM223]

Thank you, Gianluca. I have the tokens and will let you know if I have questions.

È possibile che sei italianoparlante? Habitavo in Roma quando avevo ventitre anni, e mi manca la pratica di chiachiare in italiano. Certo, ti rispondo in inglese su 'sto soggeto per gl'altri lettori.

[gbacchin]

Grazie! Sono Italiano. Infatti tutti i problemi con il Form 1116 sono dovuti ai dividendi di un'azienda italiana.

[BillM223]

Gianluca, I have the two tokens (thank you), and have been looking at them carefully. I do have a question on what you said early - "As soon as you enter HTKO column name (just the name with no numbers), line 6 on Form 1116 AMT for country A becomes a non-zero number despite the sum of the other lines is still zero. "

When you say "HTKO column name", do you mean that you entered the column name (HTKO) for column C on the Foreign Tax Credit Computation Worksheet in the drop down list? That, is, you went into Forms Mode to do this?

Since your returns have four 1116s and due to the sanitation process, all the names are now the same, it can difficult to know which forms we are talking about. Look in the Foreign Tax Credit Computation Worksheets in Part 1, line g, column B or C, where you can pull down the name HTKO. Is that what you did?

Or did you just enter the kickout in the page entitled "High Tax Kickout" which caused what you described?

[gbacchin]

Hello Bill,

EasyStep is not capable to handle HTKO (see other discussions on this topic) and, hence, everything was entered in Forms mode in the 1116 WKS.

The 4x 1116 forms should be in this sequence: Regular/Passive, Regular/General, ALT/Passive, ALT/General.

I entered HTKO in column C from the dropdown on Regular/Passive WKS -> ALT/Passive copies HTKO name and copies line 6 from Regular line 6 (which is wrong as line 3c is zero for ALT). Then, I entered the negative numbers in column C 1a and 1c to put income to zero. Line 6 is done automatically. Then, I entered line 13 as a negative number (taxes reclassified). -> This is copied to ALT/Passive. Then I do the same with Regular/General with positive numbers under HTKO in column B and line 13. -> Everything copied to ALT/General, including line 6 and line 13.

Thanks,

Gianluca

@BillM223 

[gbacchin]

Hello Bill,

just to be clear. It is tough to enter HTKO already, but is doable as per other posts and it can be done manually for Regular tax. However, it is not possible to deal with ALT. The easiest way forward is to accept that this is a bug and ask the software developers to allow to modify the Form 1116 ALT worksheets manually. Indeed, I think that if I can remove HTKO column name and modify line 13 if it appears, then all calculations will be correct also for ALT.

Thanks,

Gianluca

@BillM223 

[gbacchin]

@BillM223

Hello Bill,

the software update did not solve the 3 bugs on Form 1116:

- HTKO copied across to ALT including wrong calculations on line 6 on FORM 1116 ALT

- "1099 taxes" instead of the date on the Form 1116 Part II (not related to HTKO issue)

- Printing error on ALT copies (not related to HTKO issue)

Could you please let me know if you have now informed the software developers? If not, I will fill Form 1116 manually and submit my return by post this weekend. 

Please inform all taxpayers not to file FORM 1116 electronically as they may have error 2 and 3 which are independent of my personal circumstances.

Thanks,

Gianluca

[gbacchin]

@BillM223

I actually found the origin of the 2nd error. Foreign taxes were not reported in US dollars as Form 1116 Part II, column (m) shows an amount in foreign currency. TurboTax assumes that the dividends are reported in US dollar in a form 1099. This error was not there in previous years. Note that Easy Step always assumes that you are entering a dividend as if were reported on a 1099-DIV. No other way to enter it.

If foreign tax paid on passive income is reported to TIP you in U.S. dollars on a Form 1099-DIV, 1099-INT, or

similar statement, you don't have to convert the amount shown into foreign currency. This rule applies whether or not you can make the election to claim the foreign tax credit without filing Form 1116 (as explained earlier). Enter “1099 taxes” in Part II, column (l), and complete columns (q) through (u) for each foreign country indicated in Part I.